Our spending habits are defined by how our real values interact with (or are ignored in) our everyday life. When we are clear about what’s important to us, we make better purchasing decisions. It’s also easier to explain your spending rationales to your partner and/or children, and consequently, have a smoother ride with both.
One way we can help ourselves define the value we place on our purchases and ongoing spending is to always factor in the two elements that comprise every buying decision: how we FEEL about the product or service, and how much we NEED it.
The Love-Need Scale
If you want to be really geeky about this, you can “plot” your purchase across these two dimensions of how much you love something and how much you need something. Where it ends up on the graph drives your buying behavior:
Low Love, Low Need. This is stuff you don’t really care about and don’t really need, so you need to spend as little time and money as possible on it. My friend Carla wanted a waffle iron, but she doesn’t really care about gourmet cooking. Rather than buy one to experiment, she asked around to see if any of her friends had one she could borrow for awhile. She was offered three.
Low Love, High Need. Stuff you need but don’t love is also an area to limit money, but since you need it, you might put in a little more time in research. I don’t love technology, but I need it to do my work, so I do my homework to understand the technology and how to get the most from it, but then usually buy it used or refurbished. I bought my iPhone 4G 32 GB used for about $100 and I would never know it wasn’t brand new.
High Love, High Need. When you’re really passionate about something, or really need something to keep you healthy, you need to get the very best. Organic food, acupuncture, sporting equipment (for the sport you already do consistently) are all examples of things that aren’t just about living, they are about supporting your lifestyle. Acupuncture changed my life by giving me energy when nothing else could, so there will ALWAYS be a monthly line item for it.
High Love, Low Need. These are the little splurge items that just plain make you happy. Like sitting in Starbucks enjoying a $4 beverage. Love it? Yes. Need It? Not at all . . . but it makes me happy, so I am going to do it. Everybody has their own splurge item that makes them happy, so the key is to build it into your spending plan.
Four Steps To Using the Love-Need Scale
By now, you might be thinking about where some of your spending falls along the Love-Need Scale. To really get the most use out of it, use these four steps.
Plot The Expense on the Scale. Not all of them, and not all at once. Just take one of your expenses: Where is it on the scale? Then compare your Love-Need with how you currently buy the thing. How do you feel about where it is? Do you not love it very much but are spending a lot? Or do you LOVE it but aren’t devoting much of your spending to it?
Break Down the Expense Into Smaller Elements. Cosmetics are a great example of a category that falls all over the scale for me (but nothing is borrowed or refurbished!). I buy mascara in drugstores, but I buy foundation at Nordstrom. That’s because skin care is a bigger priority for me, but I find all mascara pretty much does its job, regardless of how much I pay.
Re-Align The Expense. You might realize that you’re spending money on stuff you don’t care about, or, that you’re not devoting enough money to things you DO care about. This means that you need to re-categorize the expense and change your behavior to reflect its new priority level.
Continue To Refine. Understanding how you feel about your spending is a process. For example, Starbucks coffee drinking used to be a MAJOR part of my budget several years ago, but now I only seem to need it a couple of times per week. Expect that your needs and priorities will change as you become clearer about how you feel about all of the things you purchase.
Actions To Take
- Play around and use the scale on your spending this week.
- If something feels out of alignment, re-plot it on the Love-Need Scale so you know whether it’s your LOVE of the item or NEED of the item that is off—then change your behavior to reflect your new understanding.
- Extra Credit: Go through your major purchases for the year and decide where they fall on the Love-Need Scale and create a spending range for them based on where they fall.